An E-Reader Price War Looms: What's the Perfect Price?

The e-book reader market has seen some interesting shake-ups in the last few months. The two biggest players in the field, Amazon's Kindle and Barnes & Noble's Nook, got massive price cuts, and both 3G-equipped e-book readers are now available for under $200. Sony's e-book readers also got their prices slashed; the non-3G Pocket and Touch Editions respectively dropped from $169 to $149 and $199 to $169, and the 3G-equipped Daily Edition got a $50 discount from $349 to $299.

An optimist would say that the e-reader market is reaching a level of consumer-accessible stability, with product prices hovering just under $200. A pessimist would say that the e-reader market is falling through the floor, and the price cuts are an attempt to get the products to compete against the wildly successful Apple iPad.

The iPad is in the same boat as the e-reader, as a device that does certain things smart phones do very well, but without the phone features. However, an iPad costs more than an e-reader and a smart phone combined. While the iPad is very good for both media playback and e-book reading, its price and shorter battery life present notable drawbacks compared to using a $200 e-reader for books and a $100-200 smart phone for media.

According to Kindle Review, the Kindle costs $190 in parts, not counting labor and distribution (as of last year). Assuming component prices have decreased over the past year, the current $185 price may still be very close to what Amazon is spending to make each device. If it goes any lower, Amazon will need to push e-books that much harder, and possibly raise the prices of each book to recoup the losses from the Kindle.

A few weeks ago, we looked at the possible free-hardware, pay-software model for the Kindle. It's not going to happen any time soon, even with Apple and Google-driven devices exerting pressure on the e-reader market. Still, it does raise the question of where the ideal price point is for e-readers. Is sub-$200 the sweet spot, or do they need to drop even lower? Will they become popular if they're $100 devices? $50? What would make you pick up a Kindle instead of an iPad?